The solutions seem simple.... Cut defense spending by getting out of the "World Police" business (could probably cut at least 40% of that budget), and raise the taxes on Soc. Sec/Medicaid/care as well as the ceiling to generate a lot of revenues. Best to do it while the baby boomers are still working because they're the ones who will bankrupt the programs if we don't. If they throw a tantrum over the higher taxes, cut their benefits.

Really interesting comment - - supamark. Never thought about it quite like that. Now, consider: IT WAS THE SPOILED BOOMER CLASS THAT RAN UP THE $16 TRILLION DOLLAR NATIONAL DEBT. IT WAS THE BOOMER GENERATION THAT SENT AMERICA'S GOOD MANUFACTURING JOBS OVERSEAS; IT WAS THE BOOMER CLASS THAT GAVE US THE, "THE GREAT WALL STREET HEIST," THAT BROUGHT MIDDLE AMERICA AND MAINSTREET TO IT'S KNEES! IT WAS THE BOOMER CLASS THAT CONVINCED STAGNET WAGE RECEIPIENTS THAT THEY COULD HAVE IT ALL - - VIA - - THE CREDIT CARD, THEY CONCEIVED - - AND, HENCE - - ARE MAKING BILLIONS THROUGH USERY CREDIT CARD, INTEREST RATES.

NOW, THE IRONY; AS THEY AGE, THEY WILL BANKRUPT AND DESTROY MEDICARE & PERHAPS, SOCIAL SECURITY; AS THEY DRAIN THE SYSTEM - - WHETHER THEY NEED IT OR NOT. MANY DON'T; BUT, "IT'S THERE; SO, WHY NOT TAKE IT!"

TALK ABOUT HAVING YOUR CAKE, AND EAT IT TOO!!!! THEY DEFRAUD US OUT OF OUR LIFE-SAVINGS; THEY BANKRUPT THE GOVERNMENT; THEY DUMP IT ON OUR CHILDREN AND GRANDCHILDREN - - THEN, THEY NAIL US AGAIN, AS WE HAVE TO SUPPORT THEIR MEDICARE AND SOCIAL SECURITY PAYMENTS.

AND, THE DISINGENUOUS RICH BASTARDS AND, THEIR ILLITERATE RED NECK
FOLLOWERS; ATTEMPT TO COVER THEIR TRACKS BY PLACING THE BLAME ON THE LESS FORTUNATE AMONG US!

The problem is a temporal one: the median voter is pretty old, so they're looking at either raising taxes for themselves (will only really matter until they retire) or cut the benefits they're looking forward to receiving. A self interested voter will be biased towards taxes.

See the current GOP. Ideological leaders support entitlement cuts personally, but the party is against it because of their demographics.

The problem we face is the rate of increase of the cost of health care. It doesn't matter who is paying; it will bankrupt the country. It seems to me that too many people forget that the public and private sectors are parts of the same economy.

We have to reorganize how health care is provided and paid for. Shifting the cost without decreasing it is pointless.

Chained CPI was part of the Obama-Boehner grand bargain. Democrats agreed to it. The Senate's floating of chained CPI last week was quickly sunk in the face of bipartisan opposition. And it was Republicans who wanted to expand the tax base and Democrats who emphatically refused. We now know why. Democrats want to leave themselves room for future negotiations. The fiscal cliff was their one shot at raising rates. They arguably have multiple bites at the apple of expanding the tax base. You could've reported those facts accurately and still make your larger point.

I don't know why Chait is so confident that voters will choose tax hikes over entitlement cuts every time. Seems more likely that you'd get a bit of both. Entitlements have been cut before. If you think this latest tax hike on the 1% was hard won, you think tax hikes on the 99% would be easier than switching to chained CPI?

I'm reminded of part of a reply I left on M.S.'s post about Bipolar disorder. "Obviously, we have yet to find out if ACA is worth its price tag or if Medicare can remain solvent until 2016."

I got that year from a Forbes piece on the annual report released by the Trustees of the Medicare on the solvency of the program. The report says 2024, but one of the actuaries says otherwise.

Trustees: Medicare Will Go Broke in 2016, If You Exclude Obamacare's Double-Counting

Double Counting: The actuary also previously confirmed that the Medicare reductions in Obamacare “cannot be simultaneously used to finance other federal outlays and to extend the [Medicare] trust fund” solvency date – rendering dubious any potential claims that Obamacare will extend Medicare’s solvency. As Speaker Pelosi admitted last year, Democrats “took a half a trillion dollars out of Medicare in [Obamacare], the health care bill” – and you can’t improve Medicare’s solvency by taking money out of the program.

Charles Blahous, one of the Medicare Trustees, explained in his recent report on the program.

(1) Medicare is going bankrupt in 2016, but the CBO scores the ACA as deficit neutral; or (2) Medicare is going bankrupt in 2024, and Blahous’ score of the ACA as increasing the deficit by $300-500 billion is accurate.

A man on $50,000 a year can afford his health insurance, his food, and in theory could save enough for an acceptable pension. Given that is the GDP per capita of the United States, it seems disgusting that anyone could suppose that these things are unaffordable. It is merely the fault of savage inequality and a selfish self-interested hard right that these things are considered so.

A man on $50,000 a year can afford his health insurance, his food, and in theory could save enough for an acceptable pension.

Some are, but others just have to consume, and borrow to consume even more.
--
(note: data is for those who are enrolled at Fidelity)

The average account balance was higher for older workers who have stashed savings in a Fidelity plan consistently for 10 years—about $228,000 for continuous savers aged 65 to 69 years old, and $250,000 for those aged 55 to 59 years old.

Still, even those higher figures are worrisomely low. For its part, Fidelity recommends workers save eight times their salary.

Other surveys point to the dangers ahead. Fully 53% of U.S. households in 2010 were at risk of being unable to maintain their pre-retirement standard of living in retirement, a nine percentage point hike from 44% in 2007, according to the National Retirement Risk Index from Boston College’s Center for Retirement Research.

What is dooming medicare is the rise in its costs greater than the rate of inflation. This is unsustainable under any tax regime imaginable. That is pretty much the only budgetary problem we have. If the rate of rise can be decreased, that would be enough to solve all of our problems. My vote is VA for all.

My preference would be to give public health care its own separate budget it has to balance. Have universal benefits and a flat tax and let voters choose how much of their income they want to devote to health care.

Could count "tax expenditures" that advantage health spending as a spending item in RR's budget. It would be a far uglier way to achieve the same end as eliminating tax subsidies for health insurance, but it'd be something.

It can be adjusted for employer coverage. E.g., subtract some portion of it from the taxes the employee has to pay. Though as TV points out, that's already done through the employer insurance tax deduction, albeit imperfectly. My preference would be to abolish the employer mandate and provide universal vouchers.

That's only because spending money on bombs and things that kill and maim is cheaper - and we spend more on it - than taking care of the people and familes of those who served after they come home maimed for life - if they come home at all.

As I recall, Republicans not only are reluctant to name specific entitlement cuts of their own, but during the campaign they accused the Democrats of doing that. (Obama claims to bend the Medicare cost curve in the long run! How terrible!)

"[...]everything the government does apart from wars and transferring money to old and poor people has gotten creamed." Haven't you heard? All that other stuff falls into the single category labeled "government waste". And they also tell me that the more government spends on "waste", the less freedom America has. Do you not like freedom?

Note that Mr Chait csrefully says "voters" rather than "taxpayers." Let alone "the folks age 18 to 67 who actually pay most of the taxes to support the welfare state."

If you asked the folks who actually pay the bills, they would probably means test benefits for the elderly in a heartbeat. You know, return Social Security to its origins as a safety net for the elderly, rather than the general retirement plan that it has become. But since the elderly vote in huge numbers, that won't happen.

Unfortunately, the label pretty much guarantees that those won't happen. Because the moment something like limiting the extremes of (extremely expensive) end-of-life medical is suggested, some demagogue will slap the Death Panel label on it. And all the politicians will jump back in terror.

And if anyone points out that there isn't much benefit to keep someone in a coma on life support for months, another demagogue will find a case of some 20 year old who was in a coma and recovered. The example's irrelevance to the discussion being cheerfully disregarded in service of ginning up as much hysteria as possible.

If you asked the folks who actually pay the bills, they would probably means test benefits for the elderly in a heartbeat.

But if there is a means test then people will only contribute to their 401(k), IRA/Roth, and regular savings up to the point where they lose Social Security benefits more than what is taken/taxed as income as it is now.

We already have a means test for Medicare, and people game that system today. (Neighbor next door gave his grand nephews his house and other assets a few years back so he's living in a small apartment and probably on Medicare and other programs now.)

You know, return Social Security to its origins as a safety net for the elderly, rather than the general retirement plan that it has become.

I don't see how living on a $14,000/year SS income is a retirement plan. For the majority who have worked and contributed for 30+ or 40+ years, they will taking a hit as it is now.

SS benefits are a floor, or one leg of a 3 legged stool.
The 2nd leg is pension/401(k). The third leg is IRA/Roth or individual savings.

I really can't help it if people consume too much and don't fund #2 and #3. That's what economics is all about, sating unlimited wants with limited resources. People who do fund #2 and #3 shouldn't be punished, unless we want an economy based on spending and borrowing and spending instead of creating goods/services, savings and investing.

Remember the unintended consequences.

Or as Newton says, "For every action, there is an equal and opposite reaction."

Ah, but our generation's parents (the "Greatest Generation"), having made sacrifices to survive the Depression and win WW II, kept making them to shelter us. While telling us how great we were and how we deserved everything. And we believed them.

In contrast, you Millenials' parents' generation (i.e. us) were too busy focusing on ourselves to do that to you. You may not be saints, but the rampant egotism only shows up in the occasional problem individuals, it's not the definition of your whole generation.

A serious difference in degree, I would say. I have spent a lifetime among my peers, and having read your posts here. I hate to be the one to break it to you, but your conviction is a pale thing compared to all too many of theirs. Sorry.

I highly recommend you read The Fourth Turning or some other book by Strauss and Howe. I'm working on it now and it highlights generational archetypes like what you're referring to. We (the Millenials) have reason to believe that our generation will be much more like the GI Generation than the Boomers.

Congress and the administration may not have to do anything if the free market deems it unlikely that the federal debts will ever be repaid, and stop lending. As rates go up, it will be prohibitively expensive to borrow and either tax increases or spending cuts will be necessary.

Or further QE will have to replace the funds now presently borrowed in the market. Not sure this is all together a bad thing - QE is, after all, a ‘wealth-tax-in-fact’. Problem is, too many of the wrong people (muppets) are on the paying-end of it – though lots of the right people (Asian CBs) are too.

Kind of seems like rates have to rise from here - as much as QE tends initially to push them down, QE's inflationary implications tends over time tend to push them up. The risk that falling bond values (from rising rates) ignites a catastrophic stampede out of bonds is one that shouldn't be ignored, IMO.

OF COURSE they went up. They were at 2.5% in summer. That's equal to the rate of inflation, which means the Treasury could borrow money for free. Would you want to loan someone money for a GENERATION without any real return? Of course not, which meant it was never going to last. It also means that the market decided it would rather break even than pump more money into Europe or the private sector and risk a negative return. It means the market trusts Washington more than anyone else to pay its bills.
Greece redux? Pfft. Learn your econ before pronouncing doomsday.

IIUC getting long-term UST rates to go up, otherwise known as "forcing investors to put their money in productive investments rather than USG bonds", was *the whole point* of Bernanke's statement that interest rate policy would not shift until unemployment has dropped, ie the Fed will tolerate higher inflation.

You're saying that 'operation twist' and the other buying of long-dated items was intended to make the rates on those go UP?? Are they buying MBS-toxics off the books of banks with QEIII$ so the prices of those items will fall and their yields go up too?

I have no idea what his intention was, Rewt - it's incomprehensible that a professional econ blogger could assert that the Fed purchases bond-assets for the purpose of making their prices fall and their yields rise.

MS, RA and STR - three guys who haven't got the script. STR is an amateur - what's the other two's excuse?

Fed wants us to buy equities. Which i faithfully do. But i'm a minority - most people are selling out of equities. Corporate types buy back their own shares while levering up on cheap interest rates, which keeps S&P up. But the herd is piling up into bonds (something i'm running away from for the past few years).

This is not going to end well - the herd's appetite for yield and risk aversion will doom it once again. Corporates know this - they are positioning themselves to benefit from bond bubble pop. Economy is either bottomed out or picking up in many sectors - it's only a matter of brief time before we'll start experiencing major cash inflows into mainstream economy. And with bulk of the herd in bonds, it won't go well for them.

Click the DATA tab for the numbers.
They have bought $82 Billion since 10/3/12, but they are $290 Billion below the peak of $1294 Billion of 6/23/10.

The amount of long term Treasuries are at a new high $1,297 Billion.

Maybe AFTER the Fed shrinks its balance sheet - ROFL, like that's going to happen - it can expand it to pay for Medicare and other programs.
(It was good enough to pay off Wall Street's casino bets at 100%)